Hathcock v. Acme Truck Lines, Inc.

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT

_______________________________

No. 00-20810

_______________________________

BOBBY HATHCOCK,

Plaintiff-Appellant,

versus

ACME TRUCK LINES, INC.,

Defendant-Appellee.

_________________________________________________

Appeal from the United States District Court
for the Southern District of Texas, Houston Division
_________________________________________________
September 6, 2001

Before JOLLY, SMITH, and WIENER, Circuit Judges.

WIENER, Circuit Judge:

Plaintiff-Appellant Hathcock seeks reversal of the district

court’s grant of summary judgment in favor of Defendant-Appellee

Acme Truck Lines, Inc. (“Acme”). Because we find Hathcock, in his

capacity as a truck driver, was an employee of Acme at all

pertinent times, we affirm the district’s court grant of summary

judgment.

I.
 FACTS AND PROCEEDINGS

Acme transports equipment, materials, and supplies throughout

the country. Hathcock, pursuant to a written agreement (the “lease

agreement”) leased his truck to Acme. The third paragraph of the

lease agreement contains the provision central to this case:

“As consideration for the use of the Leased
Equipment...Lessee [Acme] agrees to pay Lessor
[Hathcock] (70%) percent of the “Earned
Revenue derived by the Lessee from the Leased
Equipment [Hathcock’s truck],”...less driver’s
wages; payroll taxes (including FICA and other
deductions); cost of medical or hospitali-
zation insurance, if applicable;...and such
other costs or payments made by Lessee by
reason of driver employment and less any
“Operating costs and expenses,”[defined in
detail, and not contested, in the fifth
paragraph of the lease agreement]...which are
incurred by Lessee in connection with the use
and/or operation of the Leased Equipment for
which Lessor shall be responsible” (emphasis
added).

Acme accorded Hathcock the option of choosing and designating the

driver of the truck he leased to Acme or allowing Acme to supply

the driver for his truck.

Exercising his option to choose the driver of his truck,

Hathcock selected himself. Pursuant to another provision of the

lease agreement, he allocated ten percent (10%) of his Lessor’s

revenue to driver’s wages. In keeping with its company policy,

Acme informed Hathcock that he would be paid by two separate checks

—— one to him as lessor for the lease of his truck (“rental check”)

and the other to him as the designated driver of that truck

(“paycheck”). In another memorandum, Acme informed Hathcock of the

2
fixed percentage of the driver’s wages that it would deduct from

the rental check to cover those driver— and employee— related costs

detailed in the lease agreement’s above-quoted third paragraph as

chargeable to the lessor.

Eventually, Hathcock terminated the lease agreement. He then

filed suit against Acme in Texas state court, asserting various

causes of action including fraud, breach of contract, conversion,

and unjust enrichment. Acme removed the case to the United States

District Court for the Southern District of Texas. After the

parties filed cross motions for summary judgment, the district

court granted Acme’s motion and denied Hathcock’s. After his

Motion for Reconsideration was denied, Hathcock timely filed a

notice of appeal.

II.

DISCUSSION

A. Standard of Review

We review a grant of summary judgment de novo, applying the

same standard as the district court.1 A motion for summary

judgment is properly granted only if there is no genuine issue as

to any material fact.2 An issue is material if its resolution

1
Morris v. Covan World Wide Moving, Inc., 144 F.3d 377, 380
(5th Cir. 1998).
2
Fed.R.Civ.P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317,
322 (1986).
3
could affect the outcome of the action.3 In deciding whether a

fact issue has been created, we must view the facts and the

inferences to be drawn therefrom in the light most favorable to the

nonmoving party.4

The standard for summary judgment mirrors that for judgment as

a matter of law.5 Thus, the court must review all of the evidence

in the record, but make no credibility determinations or weigh any

evidence.6 In reviewing all the evidence, the court must disregard

all evidence favorable to the moving party that the jury is not

required to believe, and should give credence to the evidence

favoring the nonmoving party as well as that evidence supporting

the moving party that is uncontradicted and unimpeached.7

B. Hathcock’s Dual Capacity as Lessor and Driver

Hathcock bases his claims on the proposition that Acme and

only Acme is responsible for FICA, FUTA, and SUTA taxes.8

3
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).
4
See Olabisiomotosho v. City of Houston, 185 F.3d 521, 525
(5th Cir. 1999).
5
Celotex Corp., 477 U.S. at 323.
6
Reeves v. Sanderson Plumbing Products, Inc., 530 U.S. 133,
150 (2000).
7
Id. at 151.
8
FICA refers to Social Security or Federal Insurance
Contribution Act taxes. FUTA refers to Federal Unemployment Tax
Act taxes. SUTA refers to the state analogues of the FUTA taxes.
In the case at bar, SUTA will refer to both the Texas and Louisiana
counterparts to FUTA.

4
Therefore, contends Hathcock, Acme’s deductions from his rental

check to help defray its costs for those taxes were unlawful. The

legality of the payment system employed by Acme depends in large

part on its statutory and contractual ability to treat Hathcock as

an owner-lessor for some purposes while treating him as an employee

for others.

Hathcock does not contend that if he had selected and

designated a third party to drive his truck for Acme, that driver

would not have been lawfully and properly deemed an employee of

Acme and paid directly by Acme and not by Hathcock. Neither does

he contest that if such had been the case Acme would have been

entitled to deduct from Hathcock’s rental check all employee costs

designated as such in the lease agreement. Hathcock’s sole

contention here is that everything changes when the individual who

leases his truck to Acme drives it himself, i.e., that employee

costs incurred by Acme when the lessor drives cannot be charged

back against that person, wearing his lessor’s hat.

In diametric opposition, Acme insists that it is entitled to

treat Hathcock the same way when he drives the truck that he leased

to Acme as it would treat a third-party driver chosen by Hathcock.

Thus, Acme insists, it was entitled to pay him with two checks, one

for each of his roles, and to deduct the contractually specified

employee costs from his rental check. Acme uniformly treats all

truck drivers —— including those who own their trucks and lease

5
them to Acme —— as employees, paying them by payroll checks from

which the employees’ portions of federal income, state income, and

social security taxes are withheld. In contrast, Acme treats all

lessor-owners —— including those who choose to drive their leased-

out trucks —— as independent contractors, paying them by rental

check from which are deducted the lessor-designated driver’s wages

plus a percentage thereof to cover the employer’s share of payroll

taxes and other employer-related costs incurred by Acme.

Because most of Acme’s lessor-owners do not choose to drive

their own trucks, Acme’s two-check system is the norm, and is

commercially logical as well. As suggested by a venerable case

from this court and by a decision from the Texas Workers’

Compensation Commission as well, Acme’s application of its two-

check, dual-capacity system to Hathcock is proper:9 Acme may

simultaneously treat him as an owner-lessor and as a driver-

employee. Hathcock had the option either to drive the truck

himself or to select a third-party driver, and the lease agreement

9
See Helms v. Sinclair Refining Co., 170 F.2d 289, 291 (5th
Cir. 1948) ([T]here is not necessarily such repugnance between them
that both relationships [that of independent contractor-employer
and that of master-servant] could not exist at the same time in
connection with different phases of the work. An employee might be
an independent contractor as to certain work and a mere servant as
to other work not embraced within the independent contract.”); see
also, Rakowitz v. Zurich American Ins. Co., Docket No. SA/98-
107023/01-CC-SA45 (Tex. Workers’ Comp. Comm’n 1999) (deciding that
the deceased occupied dual roles of lessor and driver with Acme and
that on the day of his accident, he was acting as a lessor and
therefore could not recover benefits due to him as an employee).

6
clearly contemplates the lessor/driver dichotomy. When Hathcock

elected to drive the truck himself, he donned a second hat.

C. Hathcock’s Status as an Employee

Hathcock argues that he was an independent contractor at all

times and was never Acme’s employee. Acme, on the other hand,

maintains that when Hathcock elected to serve as a truck driver, he

became Acme’s employee despite his continued role as the

independent contractor/lessor of the truck. The district court, in

granting summary judgment in Acme’s favor, was satisfied that the

facts, viewed in the light most favorable to Hathcock, established

that he was an employee when he drove the truck leased to Acme. We

agree with this determination of the district court.

Hathcock’s capacity vis-à-vis Acme when he drove the truck is

material. If he were Acme’s employee, then he created a portion of

Acme’s FICA, FUTA, and SUTA tax liability, making Acme’s

withholdings from Hathcock’s driver paycheck not merely proper but

mandated by state and federal tax law. Conversely, if Hathcock

were an independent contractor when wearing his driver’s hat,

withholding monies from his rental check to cover Acme’s employee

expenses would have been improper. In fact, if Hathcock were an

independent contractor when he drove, Acme would not have been

responsible for withholding and remitting income, FICA, FUTA, and

SUTA taxes because Acme is required to do that for its employees

only.

7
 Courts have developed various tests to differentiate employees

from independent contractors. Case law from both Texas and

Louisiana recognizes “the right to control an employee’s conduct”

as the most important component of the determination.10 The state

appellate court in Hoecsht Celanese Corp. v. Compton explained that

Texas courts analyze five factors in determining the employer’s

degree of control: (1) the independent nature of the workman’s

business; (2) the workman’s obligation to furnish necessary tools,

supplies, and materials; (3) the workman’s right to control the

progress of the work except as to the final results; (4) the time

for which the workman is employed; and (5) whether the workman is

paid by time or by job.11 Similarly, we have evaluated employment

relationships in the context of Title VII and the ADEA by using a

hybrid economic realities/common law control test that focuses on

whether the alleged employer had the right to hire and fire, the

right to supervise, the right to set the work schedule, paid the

employee’s salary, withheld taxes, provided benefits, and set the

terms and conditions of employment.12 And, in examining employee

status under an FLSA claim, we considered five factors: (1) degree

10
Newcomb v. North East Ins. Co., 721 F.2d 1016, 1017 (5th
Cir. 1983) (discussing the Louisiana test); Hoecsht Celanese Corp.
v. Compton, 899 S.W.2d 215, 220 (Tex. App. - Houston 1994).
11
Hoecsht, 899 S.W.2d at 220 (citing Pitchfork Land and
Cattle Co. v. King, 162 Tex. 331 (1961)).
12
Deal v. State Farm County Mutual Ins. Co., 5 F.3d 117, 118-
19 (5th Cir. 1993).

8
of control exercised by the alleged employer; (2) the extent of the

relative investments of the worker and alleged employer; (3) the

degree to which the worker’s opportunity for profit or loss is

determined by the employer; (4) the skill and initiative required

in performing the job; and (5) the permanency of the relationship.13

Under each of the foregoing tests, the instant facts mandate

a conclusion that an employer-employee relationship existed when

Hathcock drove the truck for Acme, regardless of his

contemporaneous ownership of the vehicle and his independent

contractor role as its lessor. Acme treated Hathcock as an

employee for tax purposes and withheld mandated federal and state

income and social security taxes from his driver’s paycheck, and

paid Hathcock, the driver, a regular salary as an employee. When

he drove, the terms and conditions of Hathcock’s employment were

set by Acme: He had to submit to Acme’s medical and driving

requirements; he was subject to discipline for violation of Acme’s

personnel policies, including anti-harassment, drug testing, and

401(k) Plan; he was subject to discharge by Acme for violations of

its Driver Manual; he was bound to work exclusively for Acme; and

while doing so he had to drive a truck sporting the Acme logo at

all times. In addition, Acme covered the costs of advertising,

13
Herman v. Express Sixty-Minutes Delivery Service, 161 F.3d
299, 303 (5th Cir. 1998) (rigorously applying the five factors to
the specific facts of the case and stating, “[n]o single factor is
determinative.”).

9
employing administrative staff, and soliciting business, including

all business for Hathcock. He had no outside or personal customer

base; he was “on-call” for Acme at all times; he did not

participate in setting prices or rates for his deliveries; and Acme

owned all permits and transportation rights required for Acme

drivers, including Hathcock. The relationship between Acme and its

drivers, including Hathcock, has always been of an indefinite

duration. Finally, Acme showed that the IRS conducted an

employment tax compliance check in 1996, and found no fault with

Acme’s accounting, deductions, or treatment of drivers as

employees.

Hathcock does not dispute the facts presented by Acme.

Instead, he offers only his own deposition testimony expressing his

subjective belief that he was an independent contractor and stating

that he was treated as such by his CPA. Neither we nor the courts

of Texas, however, have allowed a party’s otherwise unsupported,

conclusional testimony to create a factual dispute sufficient to

defeat a motion for summary judgment.14

Hathcock’s second argument purporting to create a genuine fact

14
See, e.g., Marshall v. East Carroll Parish Hosp., 134 F.3d
319, 324 (5th Cir. 1998) (citing Clark v. America’s Favorite
Chicken Co., 110 F.3d 295, 297 (5th Cir. 1997) (“Unsupported
allegations . . . or deposition testimony setting forth ultimate or
conclusory facts and conclusions of law are insufficient to defeat
a motion for summary judgment.”)); Hoecsht, 899 S.W.2d at 221 (“The
key inquiry in such a situation is control, not a party’s belief as
to their status.”).

10
issue is that he possessed significant control over his work as a

driver. Under the lease agreement, Hathcock, as a lessor, was

allowed to set the driver’s wages as a percentage of the lessor’s

revenue, was authorized to choose a driver and could veto Acme’s

choice of driver if Hathcock elected not to choose one.15 As

lessor, Hathcock also had the responsibility of maintaining the

truck and providing specified services. The flaw in Hathcock’s

second argument lies in his failure to recognize (or his deliberate

blurring of) the distinction between Hathcock, the owner-lessor,

and Hathcock, the driver. Even though, as the owner-lessor, he

possessed a modicum of control, as a driver he possessed none of

consequence.

Although it is virtually indistinguishable from his second

argument, Hathcock’s third argument for insisting on the existence

of genuine issue of material fact is grounded in the

jurisprudential definition of an independent contractor. Under

both Texas and Louisiana case law, an independent contractor is one

who “works according to his own methods without direct supervision

or control by the employer except as to the overall result.”16

15
Acme allows lessors who choose their own drivers to select
a percentage, between 10% and 25% of their lessors’ revenue, as the
drivers’ wage.
16
Newcomb, 721 F.2d at 1017; Hoechst, 899 S.W.2d at 220 (“An
independent contractor has been defined as any person who, in the
pursuit of an independent business, undertakes to do a specific
piece of work for other persons, using his own means and methods,

11
Proffering this standard, Hathcock notes that, as driver, he picked

his own delivery routes, and Acme did not interfere with “other

details” of his performance.

In assessing whether drivers for a courier service were

employees or independent contractors, we stated that “initiative,

not efficiency determines independence.”17 Hathcock’s ability to

pick his delivery route and work details does not evince sufficient

initiative to allow him to be classified as an independent

contractor as a matter of law.

Generally, the worker-status inquiry is fact intensive, and

presumption weighs in favor of submission of such inquiries to the

jury. The instant case, however, presents a situation that permits

only one reasonable conclusion: Wearing his truck driver’s hat,

Hathcock was Acme’s employee.18

without submitting himself to their control in respect to all its
details.”) (internal quotations omitted) (citations omitted).
17
Herman, 161 F.3d at 305 (citing Usery v. Pilgrim Equipment
Co., 537 F.2d 1308, 1314 (5th Cir. 1976) (“[R]outine work which
requires industry and efficiency is not indicative of independence
and nonemployee status.”)).
18
Here, we assume that when driving the truck Hathcock was
discharging his driver obligations, including pick-up and delivery
of items pursuant to Acme’s business. When Hathcock drove his own
truck for the limited purpose of discharging his contractual
obligation of truck maintenance and service, then he was acting in
the capacity of lessor.

12
D. Exclusivity of Tax Provisions at Issue

Undeterred, Hathcock argues alternatively that, even if Acme’s

lessor-drivers are deemed to be its employees, Acme nevertheless

violates federal and state law when it deducts money from a lessor-

driver’s rental check to defray the employer’s FICA, FUTA, and SUTA

tax expenses. The tax liabilities created by those provisions, he

contends, are the exclusive responsibility of employers.19 The

relevant provisions, however, do not forbid Acme’s practice of

charging those employee costs back to its lessors. Acme expressly

deducts from the rental check given to its lessors a fixed

percentage of the drivers’ wages to recoup its employee-related

19
Hathcock relies on the following federal and state tax
statutes:
26 U.S.C. § 3111: “Old age, survivors, and disability insurance ——
In addition to other taxes, there is hereby imposed on every
employer an excise tax, with respect to having individuals in his
employ...paid by him with respect to employment...”

26 U.S.C. § 3301: “There is hereby imposed on every employer...an
excise tax, with respect to having individuals in his employ...”

Tex. Labor Code §§ 204.002, 204.003: “An employer shall pay a
contribution on wages for employment paid during a calendar
year...”

“An employer may not deduct any part of a contribution from the
wages of an individual in the employer’s employ.”

La. Rev. Stat. Ann. § 23:1531: “Contributions shall accrue and
become payable by each employer...with respect to wages for
employment. These contributions shall become due and be paid by
each employer...and shall not be deducted, in whole or in part,
from the wages of individuals in the employer’s employ.”

13
costs; it does not deduct these contributions from the paychecks

given to its employees, including drivers.20 Although the statutes

delineate the functions of withholding and remitting these taxes as

the responsibility of the employer vis-à-vis the taxing authority,

they only bar deduction of the employer’s portion of these taxes

from the “wages of an individual in the employer’s employ.” The

statutes do not prohibit employers from charging back and deducting

from independent contractors, suppliers, lessors, or other non-

employee personnel, funds to defray the employer’s costs in

connection with those taxes. As the arrangement embodied in Acme’s

lease agreement does not contravene federal or state laws or

regulations, much less their respective public policies, Acme may,

in keeping with its contracts, lawfully deduct part of its

employee-related expenses from its rental payments to lessors qua

lessors, even if Acme incurs those expenses by virtue of its

employment of lessors qua drivers.

III.

CONCLUSION

For the foregoing reasons, the district court’s grant of

summary judgment in favor of Acme is

AFFIRMED.

20
Pursuant to federal law, Acme withholds the employees’
share of required federal and state income and social security
(FICA)taxes, including deductions from drivers.

14